Costello et al.

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 25773 / July 11, 2023

Securities and Exchange Commission v. Costello et al., No. 2:22-cv-01388 (W.D. Wash., filed Sept. 29, 2022)

SEC Obtains Final Judgment Against Microcap Stock Promoter
 

On July 11, 2023, the Securities and Exchange Commission obtained a final judgment against defendant David Ferraro for his role in alleged microcap stock promotion schemes that generated more than $140,000 in profits for Ferraro. 

According to the SEC’s complaint, from at least October 2019 through January 2021, Ferraro and his co-defendant Justin Costello engaged in a stock promotion scheme in which Ferraro recommended and promoted to his Twitter followers and the public at least five microcap stocks that Costello owned, without disclosing that he and Costello intended to sell shares of those stocks as their prices rose, or that Costello would pay Ferraro a portion of his profits from some of those sales. Costello shared approximately $32,000 of his profits with Ferraro, and Ferraro profited approximately $41,000 from his own trading in this scheme. The SEC’s complaint also alleged that Ferraro separately conducted his own stock promotion scheme respecting two additional microcap stocks, generating profits of approximately $68,000.

Ferraro previously consented to a bifurcated settlement and consented, without admitting or denying the allegations in the complaint, to be permanently enjoined from violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and from participating in any offering of a penny stock. The final judgment against Ferraro awards the previously imposed injunctive relief and penny stock bar; orders Ferraro to pay disgorgement in the amount of $142,724.97, plus prejudgment interest thereon in the amount of $11,704.92, for a total of $154,429.89; and does not impose a civil penalty, based on Ferraro’s sworn statement of financial condition.

The SEC’s litigation is being conducted by Pascale Guerrier of the Miami Regional Office and Samuel Kalar and Tian Wen of the New York Regional Office, under the supervision of Celeste A. Chase and Sheldon L. Pollock of the New York Regional Office.